Vijay Kumar Gaba: Interim Union Budget FY20 - Election speech to wrong audience

Interim Union Budget FY20 - Election speech to wrong audience

The interim Union Finance Minister of India presented an interim Union Budget for FY20 today in the parliament.

Breaking the convention, the acting finance minister decided to launch couple of major schemes having material fiscal implications for the prospective governments.

He also announced some changes in income tax rates arguing that these are urgent and cannot wait for four months!

The acting finance minister took the opportunity to make an emphatic election speech, and virtually presented the party's manifesto for forthcoming general election.

The focus of the speech was clearly to lure voters from farming, urban poor and middle class groups, but was presented to wrong audience.

Key Budget announcements

Beta version of Universal Basic Income

The minister announced annual grant of Rs6000 to all farmers owning less than 2 hectare land in the country. Under the “Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)”, every year 3 installments of Rs2000 each would be transferred to bank accounts of farmers owning less than 2hectare (appx 5acre) of land. The government expects around 12crore small and marginal farmer families (appx 50% of the country's population) to benefit from the scheme. It is not clear whether this scheme would be applicable to landless famers also.

The scheme comes into effect from December 2018, and Rs20000cr have been provided in FY19 revised estimates for the scheme.

Rs75,000cr have been provided for the scheme in the FY20 budget.

This is a welcome step and should help the farmers to some extent. However, the negative aspect is that the government has cut allocation to 16 out of 19 Green Revolution Schemes (crop productivity improvement efforts) to allocate money for this scheme. This is pure short sightedness and populism.

Pension Scheme for Urban Poor

The minister announced a mega pension yojana namely 'Pradhan Mantri Shram-Yogi Maandhan' for the unorganized sector workers with monthly income upto Rs15,000. This scheme shall provide them an assured monthly pension of Rs3,000 from the age of 60 years. An eligible worker joining the scheme at the age of 29 years will have to contribute only Rs100 per month till the age of 60 years. Similarly, a worker joining the scheme at 18 years, will have to contribute as little as Rs55 per month only. The Government will deposit equal matching share in the pension account of the worker every month. The government expects at least 100mn workers to avail the benefit of this scheme.

This again is a welcome step.

However, the moot point is that what would be the relevance of Rs3000/month after 30years!

Railways' improvement

The acting finance minister, who happens to be the Railways Minister also, expects the operational efficiency (expenditure to income ratio) of Railways to improve materially from 98.4% in FY18 to 95% in FY20. The Railways’ overall capital expenditure programme is of Rs1,58,658cr, that sounds pretty disappointing considering the mega plans already announced for upgradation, improvement and expansion of railways network in India.

Tax proposals

1. The tax rebate under section 87A increased from Rs2500 to Rs12500. With this the effective tax liability of tax payers with a total taxable income less than Rs5,00,000 would be NIL.

2. Standard deduction for salaried tax payers increased to Rs50,000 from Rs.40,000 earlier.

3. Second self occupied house exempted from payment of tax on notional rent.

4. TDS threshold for interest on saving accounts raised from Rs10,000 to Rs40,000.

5. TDS threshold for rent on commercial properties raised from Rs1,80,000 to Rs2,40,000.

6. For taxpayers having a long term capital gain of upto Rs2cr, the exemption under section 54 could be availed for two house properties, instead of one earlier.

7. For affordable housing developers benefits under section 80-IBA extended for one more year, i.e., for the project approved till 31 March 2020.

8. Period of exemption on tax on notional rent on unsold inventory for real estate developers increased to 2yrs from one year earlier.

10 point development program for next decade

1. To build physical as well as social infrastructure for a $10trn economy and to provide ease of living through next generation infrastructure of roads, railways, ports, urban transport, gas & electric transmission, inland waterways, quality educational system.

2. To create a Digital India reaching every sector of the economy, every corner of the country and impacting the life of all Indians.

3. To make India a pollution free nation with green Mother Earth and blue skies. India to drive on Electric Vehicles, and Renewable becoming a major source of energy supply.

4. To expand rural industrialization using modern digital technologies to generate massive employment. This will be built upon the Make in India approach to develop grass-roots level clusters, structures and mechanisms encompassing the MSMEs, village industries and start-ups spread in every nook and corner of the country.

5. To clean rivers, with safe drinking water to all Indians, sustaining and nourishing life and efficient use of water in irrigation using micro-irrigation techniques.

6. Besides, Sagarmala, to develop inland waterways faster.

7. To become the launch-pad of satellites for the World and placing an Indian astronaut into space by 2022.

8. To make India self-sufficient in food, exporting to the world to meet their food needs and producing food in the most organic way.

9. To make India healthy, by providing a distress free health care and a functional and comprehensive wellness system for all.

10. To make India Minimum Government Maximum Governance nation.

Some key budget statistics